The Joneses Are Broke: How We Are Paying Off Debt

I graduated college with $47,000 in student loans. Then I made a student loan payment every month while I moved cities, got married, settled down and we had our daughter. Six years later, I noticed my balance wasn’t going down – in fact, since my husband graduated from law school, added his loans, and we added the mortgage, not many principals were ever going down.

Finances have always been such a hush-hush topic. And while personal finance is personal, what to do with our money isn’t always common sense. Investing, budgeting, and building wealth are confusing, isolating, and aren’t taught in high school. Most people can relate to drowning in debt, always feeling behind, and never getting ahead.

The reason my husband and I never talked about it? Because we didn’t know any better. We were never formally taught how to manage our money or what it should look like.

Our parents both did a wonderful job raising multiple children, taking us on vacations, and meeting all of our needs AND wants. They taught us how to manage a checkbook and helped us open our bank accounts. They even made us both get jobs at a young age (which we are oh, so thankful for). But the truth is, when it came to big financial purchases, loans, investing – our parents probably just figured it out like their parents before them.

When I was 18 and signed my student loans, I don’t remember any serious conversation around it. There may have been one (I insisted on going to a private college) but it never stuck with me. While it was no one’s fault but my own, it was extremely too easy to do. It was just another day. I did not understand that these loans would determine every financial decision I make for years and years.

Debt determines how we handle our money. It takes our income, lowers or builds our credit score, chooses the house payment we can afford, deciding where we can live and what we can do there. So choose to ignore it or face it head-on, it dictates our future. 80% of households have debt while 57% of households don’t have a budget. Because of these two things, 50% of households are not saving any money for emergencies or the future.

Why

We don’t want to wake up in 20 years and wonder where all of our hard earned money went, like we wonder where it has gone for the last decade. We want to wake up in 20 years and know that we made a conscious decision to give our family the best life possible. We want to teach our daughter through our actions and show her that sometimes you can’t have immediate gratification because something is greater when it’s earned.

So before we can teach her all about investing and saving, we have to be able to keep some of our hard earned money in our bank account – which means we have to eliminate debt payments. This is why my husband and I have set off with a four year goal to pay off all of our debt. So how much is that you ask?

Let’s get specific.

We both have old cars (my Camry has 310,000 miles – I see you, girl!), and we don’t have any credit card debt (anymore). We do have 16 student loans. Between our 11 years of college, the figure is well into the six digits. It does not start with a one, and it’s just a skip and a hop away from a quarter of a million dollars. This does not include our mortgage. To some people, that’s a ton. To others, it may be a fraction of their situation. Add in credit cards, medical bills, car notes – the debt can easily add up.

We live in a two-income household, but before you say, “Well must be nice to make all that money,” – don’t gloss over the sacrifices we make every day to get closer to our goal – sacrifices anyone can choose to make. We work every single day of the week. We do not pay for cable or Stitch Fix or Clicklist. We don’t go over our grocery budget or take spontaneous, expensive date nights.

How

So what do we do? We eat our elephant one bite at a time. I am not a financial planner; I’m not advising what to do with your money, just simply stating what we are doing with ours.

1. Get Term Life Insurance

Yes, this is about building wealth and the first thing I’m doing is spending more money. With our daughter as our main driving force, the simple truth is, we would leave her nothing if we died today. This is why we pay a small price (less than $50/month) for term life insurance so she is taken care of if something were to happen. You can choose how much the policy is worth and how long the term is. A good rule of thumb is to have life insurance if anyone relies on you to live and a policy about 10 times your salary. The ultimate goal is to build our own wealth but until we do that, this is a safety net for our daughter.

2. Budget – Necessary Expenses Only

We don’t want to be told what to do with our money, I get it. But in our mindset, it’s not our money. When we signed on the dotted line, we gave this money away before we ever earned it – we lost the right to make our own decisions with it. The only way to start keeping our money is to pay off our debt as fast as possible so we have zero payments. Cancel the subscriptions, forget eating out, and gulp, no random Target trips. For us, it also meant halting our 401(k) contributions. We want to be driven and focused on our one goal now and then we will be driven and focused on our retirement. Remember, this is temporary! We sit down at the end of each month to agree on the budget for the next – every budget and every month varies depending on the needs. 

3. Set Goals

Once we knew how much we needed to live each month and we knew our income, we knew how much money should be left. We made a list of our debts, from smallest to largest (the way we wanted to tackle them). Then, we set measurable and attainable goals. With such a large amount of debt, you can see how our situation could be overwhelming. It’s easier for us to make smaller, realistic goals. Meeting these goals gives us momentum to keep going. We set a one-month goal and a six-month goal, both with very specific dollar amounts. Here are some charts we use for inspiration. If you do not have money left after your expenses, you have an income predicament. To my next point…

4. Start Working

We have five jobs between us – and our daughter is not in childcare. With her under either of our watch constantly, there is a lot of juggling and patience at play. I understand not everyone has time for multiple jobs, but there is always ways to earn extra income if it is a priority. The only way to get through it is to do it. We are working longer, harder days than ever so we can enjoy our days to come. (Dave Ramsey fans would say, “Live like no one else so later you can live and give like no one else.”) To start earning, consider monetizing your hobbies – can you sell something on Etsy? Mow lawns or shovel driveways? If not, fast food joints are almost always hiring! The name of the game is to maximize your income as fast as possible. Another reminder that this is temporary! This is a momentary sacrifice for a greater life goal.

5. Don’t Give Up

A bad day can’t turn into a bad week or a bad month. Lifetime habits are hard to break and when you see others living in debt and not acting their wage; it can be tempting to keep up with the Joneses. But the Joneses are broke. The Joneses are behind and can’t get ahead. The Joneses don’t have to answer to our daughter. Remembering your driving force will keep you going on the good days and the bad.

Of course, there are things we would love to do – finish our basement, own cars without dents, go on a cruise – but I don’t want to do any of those things more than I want to get financially free from my lenders. Contentment is learned and we are happier than ever living on less than ever. We will continue to focus on the long-term instead of the short-term.

If you are thinking of starting, it’s never too late. It’s not about where you start, it’s about where you finish!

P.S. Dating or having fun with your family can always be done for free. Check the blog for local ideas!